TY  - JOUR
AU  - Metrick,Andrew
AU  - Zeckhauser,Richard
TI  - Price versus Quantity: Market Clearing Mechanisms When Sellers Differ in Quality
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5728
PY  - 1996
Y2  - August 1996
UR  - http://www.nber.org/papers/w5728
L1  - http://www.nber.org/papers/w5728.pdf
N1  - Author contact info:
Andrew Metrick
Yale School of Management
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520
Tel: 203/432-3069
E-Mail: metrick@yale.edu

Richard J. Zeckhauser
John F. Kennedy School of Government
Harvard University
79 John F. Kennedy Street
Cambridge, MA  02138
Tel: 617/495-1174
Fax: 617/384-9340
E-Mail: richard_zeckhauser@harvard.edu
AB  - High-quality producers in a vertically differentiated market can reap superior profits by charging higher prices, selling greater quantities, or both.  If qualities are known by consumers and production costs are constant, then having a higher quality secures the producer both higher price and higher quantity; if marginal costs are rising, having a higher quality assures only higher price.  If only some consumers can discern quality but others cannot, then high- and low-quality producers may set a common price, but the high-quality producer will sell more.  In this context, quality begets quantity.  Empirical analyses suggest that in both the mutual fund and automobile industries, high-quality producers sell more units than their low-quality competitors, but at no higher price (or markup) per unit.
ER  -